Special Property Transactions Problems

Problem 45:
Carlton holds undeveloped land for investment. His adjusted basis in the land is $200,000, and the FMV
is $325,000. On November 1, 2018, he exchanges this land for land owned by his son, who is 31 years
old. The appraised value of his son’s land is $320,000 with a basis of $310,000.
a. Calculate Carlton’s realized and recognized gain or loss from the exchange with his son and on
Carlton’s subsequent sale of the land to a real estate agent on July 19, 2019, for $375,000.
b. Calculate Carlton’s realized and recognized gain or loss from the exchange with his son if Carlton
does not sell the land received from his son, but his son sells the land received from Carlton on
July 19, 2019. Calculate Carlton’s basis for the land on November 1, 2018, and July 19, 2019.
c. What could Carlton do to avoid any recognition of gain associated with the first exchange prior
to his sale of the land?
Problem 52:
Patti’s garage (used to store business property) is destroyed by a fire. She decides not to replace it and
uses the insurance proceeds to invest in her business. The garage had an adjusted basis of $50,000.
a. If the insurance proceeds total $20,000, what is Patti’s recognized gain or loss?
b. If the insurance proceeds total $60,000, what is Patti’s recognized gain or loss?
Problem 56:
Pedro sells investment land on September 1, 2018. Information pertaining to the sale follows:
Adjusted basis
Selling price
Selling expenses
Down payment
Four installment payments
Mortgage assumed by the buyer
$25,000
90,000
1,500
12,000
15,000
18,000
Each installment payment is due on September 1 of 2019, 2020, 2021, and 2022 (ignore interest).
Determine the tax consequences in 2018, 2019, 2020, 2021, and 2022.
Problem 59:
Dominique is a manager for a regional bank. He is being relocated several states away to act as a
temporary manager while a new branch is interviewing for a permanent manager. He will leave on May
1, 2018, and will be at the new location for less than one year. He sells his personal residence on April
15, 2018, for $123,000 (adjusted basis $95,000). Upon completion of the assignment, he purchases a
new residence for $200,000.
a. What are Dominique’s realized and recognized gain or loss?
b. What is Dominique’s basis in the new residence?
c. Assume that Dominique is transferred out of state and sells his new residence for $230,000 two
months later (he is single). What are the realized and recognized gains?
Problem 61:
On January 1, 2018, Myron sells stock that has a $50,000 FMV on the date of the sale (basis $75,000) to
his son Vernon. On October 21, 2018, Vernon sells the stock to an unrelated party. In each of the
following, determine the tax consequences of these transactions to Myron and Vernon:
a. Vernon sells the stock for $40,000.
b. Vernon sells the stock for $80,000.
c. Vernon sells the stock for $65,000.